Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Retail sales were flat in November, following four consecutive months of solid growth. Moreover, the preliminary estimate suggests that retail sales surged 1.6% m-o-m in December, likely due to the GST holiday. In volume, retail sales declined, indicating price increases were the main support to retail sales. Nevertheless, despite the increase in overall spending in the second half of 2024, core retail sales in volume have seen a more modest increase and have been mostly unchanged since Spring 2022 (Fig 1).
Retail sales have been driven mainly by population growth in recent years. After months of declines, spending per person seems to be stabilizing. Nevertheless, spending volume per capita is still about 5.5% below its recent peak. We estimate that retail sales adjusted for inflation and population growth were lower by 2.6% y-o-y in November, while core retail sales were also down (-4.4% y-o-y).
While we are seeing some signs of stabilization, spending per capita adjusted for inflation and population is lower than for the same month last year in most provinces (see Fig 4). We continue to note that there is a link between the strength in consumer spending, indebtedness and insolvencies, with much weaker retail sales in provinces with higher debt and insolvencies.
Overall, the report suggests that consumer spending had stabilized before the GST holiday sent consumers on a spending spree. However, the question is how much of the increase in spending in December will be simply spending that is brought forward, leading to weakness once the tax cut is reversed. In addition, the weaker population growth resulting from lower immigration targets announced will be a drag on aggregate spending. However, recent rate cuts and continued improvement in income should lead to some increase in spending per capita this year and offset part of the impact of slower population growth (see Searching for the terminal rate). We believe the BoC will look through the surge in retail sales at the end of 2024 and continue to focus on the downside risks to the outlook. Hence, we continue to think the BoC will cut by 25bp at next week’s meeting.
Retail sales were flat m-o-m in November, in line with expectations. Compared to the same month last year, retail sales rose 1.6% y-o-y.Statistics Canada also reports that retail sales are estimated to have jumped 01.6% m-o-m in December based on a preliminary estimate likely pushed higher by the GST holiday.
Monthly sales were lower in 6 out of 9 subsectors. The main declines were at food and beverage retailers (-1.6% m-o-m), building materials and garden centres (-2.1% m-o-m) and general merchandise retailers (-1.0% m-o-m). These lower sales were partly offset by increases in spending at motor vehicles and parts dealers (+2.0% m-o-m) and gasoline stations (+0.7% m-o-m).
Core retail sales, which excludes motor vehicles and parts and gasoline stations, eased 0.4% m-o-m in November (+1.0% y-o-y).
In volume terms (i.e. adjusted for inflation), retail sales declined by 0.4% in November (+1.5% y-o-y). Core retail sales are estimated to have eased -0.4% on the month (-1.1% y-o-y).
At the regional level, headline retail sales declined in most provinces. The biggest decreases were in New Brunswick (-2.0% m-o-m), PEI (-1.8% m-o-m), Alberta (-1.1% m-o-m), and Nova Scotia (-0.4% m-o-m). These were partly offset by increases in Newfoundland (1.5% m-o-m), Ontario (+0.5% m-o-m), and BC (+0.4% m-o-m).
Focusing on the y-o-y changes, the value of retail sales increased in most provinces, except in PEI (-3.4% y-o-y) and New Brunswick (-2.2% y-o-y). Retail sales rose the most in Newfoundland (+8.1% y-o-y), Saskatchewan (+5.1% y-o-y), Nova Scotia (+3.2% y-o-y), and Alberta (+3.1% y-o-y), and
Looking at the value of core retail sales, they are higher compared to last year in most provinces, except PEI (-5.0% y-o-y) and Nova Scotia (-0.8% y-o-y). The biggest increases are in Saskatchewan (+9.4% y-o-y), Alberta (+2.5% y-o-y), Manitoba (+2.1% y-o-y), and Quebec (+2.1% y-o-y).
In volume terms, we estimate retail sales increased in most provinces, except in PEI (-4.2% y-o-y), New Brunswick (-3.0% y-o-y), and Ontario (-0.2% y-o-y). It increased the most in Newfoundland (+7.2% y-o-y), Saskatchewan (+4.2% y-o-y), Nova Scotia (+2.3% y-o-y), and Alberta (+2.2% y-o-y).
In Alberta, retail sales dropped +1.1% m-o-m in November (+3.1% y-o-y). Declines in sales at motor vehicles and parts dealers, general merchandise retailers, and health and personal care stores were the main sources of weakness. These were partly offset by higher sales at food and beverage stores, furniture, electronics and appliances stores, sporting goods, hobby, books and other stores, and gasoline stations.
As a result, we estimate that core retail sales rose by 2.6% m-o-m (+2.5% y-o-y) in November. Although there are no official volume details at the provincial level, we estimate retail sales volumes in the province rose by 2.4% y-o-y in November.
Statistics Canada also releases retail sales numbers for Calgary and Edmonton. The data shows some divergence between regions. As such, retail sales in Edmonton declined by 3.2% y-o-y, while they rose in Calgary (+4.4% y-o-y) and in the rest of the province (+7.0% y-o-y).
The core measure shows a different regional disparity, with sales increasing by 3.3% y-o-y in Edmonton and 4.3% y-o-y in the rest of the province, while it is flat in Calgary.